Rise in reduced value-added tax rate

The reduced value-added tax rate applies inter alia to basic necessities and to selected labour-intensive services. The 2019 Tax Plan provides for an increase – effective the first of January 2019 – in the reduced value-added tax rate to nine percent (from its current level of six percent). As the rate increase is being implemented without any transitional measure, the use of the old or the new reduced rate will depend on the timing of the underlying value-added tax charge.

Prepayments

Prepayments collected in 2018 are liable for the six percent reduced rate irrespective of the date of the invoice being raised or the activity in question being performed. All relevant elements of the activity in question must be known at the moment the payment is made in order for it to qualify as a prepayment.

Regular payments

There are three “regular payment” scenarios:

• the entrepreneur in question uses the cash accounting system, which involves value-added tax being rendered due and payable when the relevant payment is received. This scenario involves the six percent rate having to be used for payments received during 2018 and the nine percent rate for payments received in 2019;
• the entrepreneur in question comes under the “compulsory invoicing” regime, which causes the value-added tax being rendered due and payable at the moment the underlying invoice is raised. The compulsory invoicing regime applies to all goods supplied and services rendered to other entrepreneurs and/or to legal entities lacking entrepreneurial status, as well as to distance sales and intra-Community supplies. It is not until the actual supply and/or rendering of the goods and/or services take(s) place that the associated invoicing obligation comes about;
• the entrepreneur in question does not come under the compulsory invoicing regime and does not use the cash accounting system either. In this case the value-added tax will be rendered due and payable on the occasion of the goods and/or services in question being supplied and/or rendered. It follows that here too the six percent rate should be used for payments received during 2018 and the nine percent rate for payments received in 2019, irrespective of the timing of the invoice being raised.

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Dutch version: Verhoging lage btw-tarief